Selling your business to an external buyer can be a complex process, and any mistakes made throughout the process can easily jeopardize a successful sale. These are 5 of the most common mistakes we see sellers make when attempting to sell their business:
- Not knowing the value of your agency
One of the most common complaints from business owners trying to sell their business is that they do not know the value of their business. Knowing the value of your business is important because it helps you properly evaluate offers and ensure you receive the highest price and best terms.
- Not preparing the business for sale
Determining the value of your insurance agency is only the first step in the process. Another factor that will affect your success when selling the business is your level of preparedness. Often times, a business owner rushes to put their business on the market and receives an offer, but the deal falls apart because the seller was not prepared and the buyer backs out of the deal. Preparing your business for sale includes assessing a wide variety of operational and financial issues, such as:
- Are all processes and procedures well documented?
- Are up-to-date accountant prepared financial statements available?
- Is the business consistently profitable?
- Are all your contracts up to date and assignable?
- Is your minute book up to date?
- Are your government obligations up to date? (PST, GST, payroll taxes, etc.)
- Are there any tax planning and/or insurance structures you should put in place before you sell?
- Trying to sell the agency to a buyer who doesn’t want to buy
There will always be more buyers looking for a business to buy than there will be businesses available for sale at any one time. This means that you will likely be faced with buyers with a variety of backgrounds and motivations. Some buyers will want to buy only on their terms and conditions, some may have too many decision-makers to please, and others only want to buy the “perfect” business. Wasting time on buyers who aren’t serious about buying your business takes away valuable time from those buyers who really want to buy.
- Waiting too long to sell
Too many owners wait until the last minute to decide to sell their business. If you do, you may not receive the highest price for your insurance agency. For this reason, it is important to prepare your business for sale early. By planning early, you will be better prepared to take advantage of opportunities that arise when the time is right.
- Changing your mind
It is common for long-time business owners to feel a sense of attachment to their business, as the business has been a major part of their life for many years. One mistake that can de-rail a successful sale is when the seller has second thoughts about selling their business. They may be too attached to the memories created owning the business, or they may have heard from others that the price is too low and that they should wait for a better time to sell. If you negotiated a deal that you thought was fair at the beginning, don’t let well-meaning outsiders influence the sale and deter you. And, if you have any doubt about selling the business, don’t begin the process. Wait until you are certain that selling your business is the right decision both for you, and the business.